THE IMPACT OF CASH MANAGEMENT ON PROFITABILITY AND SUSTAINABILITY OF SMALL AND MEDIUM MANUFACTURING BUSINESS IN KIRTIPUR MUNICIPALITY

Abstract

The general purpose of the study is to identify the current cash management practices used by small and medium businesses in the Kirtipur Municipality and identify the impact of such practices on their profitability and sustainability. The specific objective are to assess the current position of cash management practices of small and medium manufacturing businesses, to examine the relationship of cash management on profitability of small and medium manufacturing businesses and to analyze the effect of cash management on sustainability of small and medium manufacturing businesses. The study is based on the descriptive and causal comparative research design. Primary data was collected using self administered questionnaires issued to respondents who were owners/employees of the registered SMMB in Kirtipur Municipality. A sample size of 80 respondents was taken into account out of 380 population for the study using convenience and purposive sampling method. Correlation and multiple regression analysis are carried out to establish the association among the variables. The study concluded positive and significant relationship between Cash Conversion Cycle and Return of Equity. In this research, the profitability and sustainability of small and medium businesses is found to be affected by Cash Conversion Cycle, Cash flow management, Inventory management. There is a positive but insignificant relationship between Cash Conversion Cycle and profitability on one hand and a negative insignificant relationship between Cash Conversion Cycle and sustainability. As a result the study concluded that most SMEs had declining levels of long-term solvency and growth. Finally the study established that cash flow control and monitoring had significant influence on the sustainability of SMEs. The finding indicates that there is a positive association between cash management and profitability but the impact is minimal. Similarly Cash management practices positively influences to the sustainability but the impact is minimal as well. The study also concluded that cash management practices positively influences to the sustainability ANOVA test shows that there is significant difference in the opinion of respondents related to Cash management, Sustainability, Profitability at 5 percent significant level.